GDP accelerates more than expected in Q4

A second national accounts release revealed the Slovak economy rose at a faster rate than initially estimated at the tail-end of 2023, with GDP growing 1.3% on an annual basis. The result was an improvement from both the 1.1% increase tallied in the third quarter and from the preliminary estimate of a 1.2% expansion. On a seasonally adjusted quarter-on-quarter basis, economic growth gained steam, picking up to 0.3% in Q4, compared to the previous quarter's 0.2% growth. Despite Q4’s uptick, the economy lost considerable momentum overall in 2023, expanding 1.1% (2022: 1.8%).

Q4’s year-on-year upturn chiefly reflected accelerating fixed investment growth, which improved to a multi-year high of 15.9% in Q4, above the 2.8% expansion in the prior quarter. Conversely, private consumption fell 2.3% in the fourth quarter, following the third quarter's 1.8% contraction. Cooling price pressures and multi-year high nominal wage growth prevented a steeper contraction in household spending. Moreover, public spending growth slowed to 2.0% in Q4 (Q3: +2.9% yoy). On the external front, exports of goods and services slipped into contraction in the fourth quarter, falling 0.9% on an annual basis and contrasting the third quarter's 0.1% expansion. Meanwhile, imports of goods and services contracted at a sharper rate of 5.6% in Q4 (Q3: -4.0% yoy).

Our Consensus is for the economy to gain further momentum in Q1 2024 and for growth to accelerate significantly in 2024 as a whole from 2023. Receding price pressures, continued nominal wage growth and monetary policy easing should drive a rebound in private spending. This, paired with recovering external demand and stronger public spending growth, will support the economy this year.

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